How a Singapore Consulting Firm Used Dual Employment to Deploy Regional Contractors Across 6 Asian Markets Without Triggering Permanent Establishment Risk

When professional services firms expand across Southeast Asia, they face a structural challenge that directly affects both profitability and compliance. Hiring full-time employees in every country creates permanent establishment (PE) risk, triggers local payroll tax obligations, and requires expensive entity setup in each jurisdiction.

Relying purely on independent contractors avoids PE risk but creates classification disputes, limits control over work quality, and exposes the firm to penalties if local tax authorities reclassify contractors as employees.

This case study follows Nexus Advisory Group (name changed), a Singapore-based management consulting and market research firm serving mid-market B2B clients across Asia. Between 2019 and 2025, Nexus scaled from 12 Singapore-based consultants to a regional team of 47 professionals working across Singapore, Malaysia, Indonesia, Vietnam, Thailand, and the Philippines.

Instead of establishing subsidiaries in each country or hiring contractors directly, Nexus implemented a dual employment structure. Each regional consultant held two simultaneous employment contracts: one with Nexus Advisory (Singapore) for strategic work, and another with a local Professional Employer Organisation (PEO) or co-employment entity for in-country fieldwork.

This structure allowed Nexus to deploy consultants across Asia whilst avoiding PE triggers, optimising individual tax residency, and maintaining full operational control without the compliance burden of six separate legal entities.

The Firm: Singapore Consultancy Serving Regional Mid-Market Clients

Nexus Advisory Group: The Business Model

Nexus Advisory launched in 2019 as a boutique consulting firm focused on helping mid-market companies (USD 10-100 million revenue) expand across Southeast Asia.

The firm's core services:

• Market intelligence:Mapping competitor landscapes, partner networks, regulatory requirements, and customer segments before clients commit expansion capital

• Buyer research:Running qualitative studies (focus groups, customer surveys, eye-tracking analytics) to diagnose why conversion rates stall or why certain products fail to gain traction

• Channel strategy:Identifying and vetting potential distributors, resellers, and strategic partners across ASEAN markets

Client Profile (2019-2025):

• Industries:Technology, industrial equipment, financial services, healthcare, FMCG distribution

• Geography:Clients headquartered in Singapore, Hong Kong, Australia, UK, with expansion targets in Malaysia, Indonesia, Vietnam, Thailand, Philippines

• Project economics:Average project size USD 20,000-50,000, typical engagement duration 3-6 months

Why Regional Presence Mattered

Nexus discovered early that clients would not pay Singapore consulting rates for desk research conducted remotely. Clients demanded boots-on-the-ground fieldwork: face-to-face interviews with potential partners, site visits to competitor facilities, attendance at local industry trade shows.

Example client requirement (2020):A Singapore fintech wanted to assess potential payment gateway partners in Indonesia. The client specifically requested that Nexus conduct in-person interviews with five shortlisted partners in Jakarta, attend the annual Indonesia Fintech Summit, and visit partner office locations to verify operational legitimacy.

Nexus could not deliver this scope using only Singapore-based consultants flying in occasionally. The firm needed consultants based in Jakarta who understood local business culture, spoke Bahasa Indonesia fluently, and could conduct multi-day fieldwork without incurring excessive travel expenses.

The Challenge: Scaling Regionally Without Creating Six Legal Entities

Option 1: Establish Subsidiaries in Each Target Country

Nexus initially considered setting up wholly-owned subsidiaries in Malaysia, Indonesia, Vietnam, Thailand, and the Philippines.

Requirements per country:

• Local entity incorporation (PT in Indonesia, Sdn Bhd in Malaysia, etc)

• Registered office and local directors (some countries require resident directors)

• Annual audit and statutory filings

• Local payroll system and employment contracts compliant with each country's Employment Act

• Corporate tax filing in each jurisdiction

• Potential foreign ownership restrictions (Indonesia limits foreign ownership in certain consulting sectors)

Estimated annual compliance burden per country:USD 15,000-30,000 in audit fees, corporate secretarial services, tax filing, legal compliance reviews.

Total estimated setup and annual cost for six countries:USD 100,000-180,000 annually just for entity maintenance, before hiring anyone.

Nexus's revenue in 2020:USD 1.2 million. Allocating 10-15% of revenue to entity compliance across six countries was financially unviable, especially when Nexus only had 2-4 consultants planned for each market initially.

Option 2: Hire Independent Contractors Directly

Nexus explored hiring consultants in each country as independent contractors, avoiding entity setup altogether.

How this would work:

• Nexus Advisory (Singapore) signs consulting services agreements with individual contractors in Jakarta, Kuala Lumpur, Hanoi, Bangkok, Manila

• Contractors issue invoices to Nexus Singapore for services rendered

• Contractors handle their own tax filing, social insurance contributions (if applicable), and business registration in their home countries

Why Nexus rejected this approach:

1. Permanent Establishment (PE) Risk

If Nexus contractors in Indonesia conducted significant fieldwork, attended client meetings, and represented Nexus to third parties (e.g., interviewing potential partners on behalf of Singapore clients), Indonesian tax authorities could argue that Nexus had created a taxable presence in Indonesia.

Under Indonesian tax law, a foreign company creates a PE if it maintains a fixed place of business or has dependent agents habitually exercising authority to conclude contracts on behalf of the foreign company.

Implication:Nexus would be required to register as a PE in Indonesia, file corporate tax returns, and pay Indonesian corporate tax on profits attributable to Indonesian activities, even without a formal subsidiary.

2. Contractor Misclassification Risk

Singapore's Ministry of Manpower (MOM) and tax authorities in Malaysia, Indonesia, Vietnam, Thailand, and the Philippines scrutinise contractor relationships to prevent disguised employment.

Red flags that trigger reclassification:

• Contractor works exclusively for one company (Nexus) for extended periods (6+ months)

• Contractor receives monthly retainer payments (appears like salary)

• Contractor uses company email, branding, and reports to Nexus managers daily (indicates employment relationship, not independent consulting)

• Contractor does not provide services to other clients concurrently

Penalties for misclassification:

• Backdated payroll taxes, social insurance contributions, and penalties

• Employment Act claims (contractors reclassified as employees can claim annual leave, medical leave, severance pay retroactively)

• Reputational damage and potential debarment from government tenders

Nexus wanted full control over consultant work quality, required consultants to use Nexus branding when meeting clients, and needed consultants available full-time for project assignments. This control level made true independent contractor status legally fragile.

The Solution: Dual Employment Structure with Singapore + Local PEO Contracts

Nexus implemented a dual employment structure where each regional consultant held two simultaneous employment contracts.

Structure Overview

Contract 1: Singapore Employment (Nexus Advisory Pte Ltd)

• Each regional consultant is employed part-time (or full-time, depending on case) by Nexus Advisory Pte Ltd (Singapore)

• Scope: Strategic consulting work, client relationship management, report writing, data analysis conducted for Singapore-based clients

• Compensation: Base salary paid by Nexus Singapore, subject to Singapore income tax

• Work location: Predominantly remote, occasional travel to Singapore for training and team meetings

Contract 2: Local Employment (Professional Employer Organisation in Home Country)

• The same consultant is simultaneously employed by a local PEO or co-employment entity in their home country (e.g., Indonesia PEO for Jakarta-based consultant)

• Scope: Fieldwork, local market research, client site visits, partner interviews conducted within the consultant's home country

• Compensation: Separate salary or fee paid by local PEO, subject to local income tax and social insurance contributions

• Work location: In-country fieldwork

How the two contracts interact:

When a Singapore client engages Nexus for Indonesia market research, the Jakarta-based consultant's time splits across both contracts:

• Singapore contract hours:Desk research, analysis, report drafting, client calls conducted remotely (no physical presence required in Indonesia for these tasks)

• Local PEO contract hours:Field interviews in Jakarta, attendance at Indonesia trade shows, site visits to potential partner offices

The two contracts allocate work and compensation based on where the work physically occurs and the nature of services rendered.

Implementation: How Nexus Structured Dual Employment Across Six Countries

Step 1: Select Professional Employer Organisations (PEOs) in Each Target Country

Nexus partnered with regional PEO providers who could act as the legal employer of record for consultants in Malaysia, Indonesia, Vietnam, Thailand, and the Philippines.

What a PEO does:

• Registers as the official employer in the local country

• Issues employment contracts compliant with local labour law

• Processes monthly payroll, withholds income tax, and remits social insurance contributions (CPF equivalent in each country)

• Handles statutory benefits (annual leave, medical leave, severance pay as required by local law)

• Assumes legal employer liability, shielding Nexus from direct employment law exposure

PEO partners Nexus used (2020-2025):

• Malaysia:Contracted with a Kuala Lumpur-based PEO to employ three consultants (2020-2025)

• Indonesia:Partnered with Jakarta PEO to employ five consultants (2020-2025)

• Vietnam:Used Hanoi-based PEO for four consultants (2021-2025)

• Thailand:Bangkok PEO employed three consultants (2022-2025)

• Philippines:Manila PEO employed two consultants (2023-2025)

How co-employment worked:

Nexus Singapore contracted with each PEO as a client, not as a parent company. The PEO invoiced Nexus monthly for:

• Consultant salaries (which the PEO paid to consultants on Nexus's behalf)

• Employer social insurance contributions

• PEO service fees (typically 5-10% of gross salary)

Critically, the PEO was the legal employer under local law, meaning Nexus Singapore did not need to establish subsidiaries, register as an employer, or navigate local payroll compliance directly.

Step 2: Structure Dual Employment Contracts to Avoid PE and Tax Issues

Nexus worked with tax advisers in Singapore and each target country to structure dual employment contracts that satisfied three requirements:

Requirement 1: No Permanent Establishment in Local Countries

To avoid creating a PE, Nexus ensured that consultants employed under the Singapore contract did not conduct activities in their home countries that would trigger PE status.

Activities conducted under Singapore contract (PE-safe):

• Desk research using publicly available data

• Analysis and report writing conducted remotely

• Client calls and video meetings (no in-person meetings in local country)

• Strategic planning and internal Nexus meetings

Activities conducted under local PEO contract (attributed to local entity, not Singapore):

• Face-to-face interviews with local partners, competitors, customers

• Site visits to factories, offices, retail locations

• Attendance at local trade shows and industry events

• Any work requiring physical presence in the local country

By splitting work geographically, Nexus ensured that Singapore-contract activities never created a fixed place of business or dependent agent presence in local countries.

Requirement 2: Tax Residency Optimisation

Dual employment allowed consultants to optimise personal tax residency based on where they spent most of their time.

Example: Jakarta-based consultant (2021-2025)

• Physical presence:280 days per year in Indonesia, 30 days in Singapore, 55 days travelling (Malaysia, Vietnam for projects)

• Tax residency:Indonesian tax resident (presence exceeds 183 days in Indonesia)

• Income allocation:

  • Singapore contract income: 30% of total compensation (reflects time spent on remote strategic work)

  • Indonesia PEO contract income: 70% of total compensation (reflects time spent on Indonesia fieldwork)

Tax treatment:

• Indonesian income taxed in Indonesia at progressive rates (5-30% depending on income bracket)

• Singapore income technically taxable in Singapore, but Indonesia-Singapore Double Taxation Agreement (DTA) provides relief. Since consultant is Indonesian tax resident and Singapore income relates to work performed in Indonesia, consultant can claim foreign tax credit in Indonesia to avoid double taxation

Requirement 3: Avoid Contractor Misclassification

Because consultants held formal employment contracts (not contractor agreements), they were legally classified as employees in both Singapore and their home countries.

This eliminated misclassification risk. Consultants received statutory benefits (annual leave, medical leave, CPF/social insurance contributions) as required by law in both jurisdictions.

Step 3: Operationalise Time Tracking and Payroll Allocation

To maintain clean separation between Singapore and local work, Nexus implemented time-tracking protocols.

Time allocation system (2020-2025):

• Consultants logged hours weekly, categorising work as either Singapore-attributable (remote strategic work) or local-attributable (fieldwork in home country)

• Nexus Singapore payroll paid consultants monthly for Singapore-contract hours

• Local PEO payroll paid consultants monthly for local-contract hours

• If a consultant spent 60% of hours on fieldwork and 40% on remote strategic work in a given month, their compensation split 60% local PEO / 40% Singapore accordingly

Example: Indonesia consultant monthly breakdown (March 2023)

• Total hours worked: 160 hours

• Singapore contract hours: 55 hours (desk research, client calls, report writing conducted remotely)

• Indonesia PEO contract hours: 105 hours (field interviews in Jakarta, trade show attendance, site visits)

• Singapore payroll: Paid 55/160 of monthly base salary

• Indonesia PEO payroll: Paid 105/160 of monthly base salary

This hourly allocation approach ensured that compensation matched where work physically occurred, supporting the dual employment structure under tax and labour law.

Results: Scaling from 12 to 47 Consultants Without Entity Setup (2019-2025)

Growth Trajectory

2019 (Launch):

• 12 consultants, all Singapore-based

• Revenue: USD 800,000

• Markets served: Singapore, Malaysia (occasional cross-border projects)

2020 (First Dual Employment Hires):

• 18 consultants total: 12 Singapore, 3 Malaysia (KL-based under dual employment), 3 Indonesia (Jakarta-based under dual employment)

• Revenue: USD 1.2 million

• First full-year using dual employment structure

2022 (Regional Expansion Accelerates):

• 32 consultants total: 15 Singapore, 5 Malaysia, 6 Indonesia, 4 Vietnam, 2 Thailand

• Revenue: USD 2.8 million

• Dual employment structure now standard for all non-Singapore hires

2025 (Current State):

• 47 consultants total: 20 Singapore, 6 Malaysia, 8 Indonesia, 6 Vietnam, 4 Thailand, 3 Philippines

• Revenue: USD 4.5 million (projected)

• Zero legal entities outside Singapore. All regional consultants employed via dual employment structure

Financial Impact: Entity Setup and Compliance Savings

Avoided entity setup and annual compliance (2020-2025):

If Nexus had established subsidiaries in Malaysia, Indonesia, Vietnam, Thailand, and the Philippines, estimated costs would have included:

• Initial incorporation: USD 5,000-15,000 per country

• Annual audit, tax filing, corporate secretarial: USD 15,000-30,000 per country per year

• Local registered office rent: USD 5,000-12,000 per country per year

• Legal and compliance reviews: USD 8,000-15,000 per country per year

Estimated aggregate avoided costs (2020-2025):USD 500,000-800,000 in entity setup, audit, tax compliance, and legal fees across six years and five countries.

Actual PEO service fees paid (2020-2025):

PEO fees typically ranged 5-10% of gross consultant salaries. For 27 regional consultants (2025 total minus Singapore-based), average annual salary USD 45,000-60,000, PEO fees totalled approximately USD 80,000-130,000 annually.

Net savings:Dual employment via PEO cost significantly less than establishing and maintaining five separate legal entities, whilst providing full operational control and compliance protection.

Operational Impact: Client Delivery and Market Coverage

Before dual employment (2019):

• Nexus could only serve clients in Singapore and Malaysia (where consultants could conduct short trips without triggering PE risk)

• Indonesia, Vietnam, Thailand, Philippines projects required partnering with local subcontractors, which diluted Nexus's control over quality and timelines

• Average project margin: 40-45% (after subcontractor fees)

After dual employment structure (2020-2025):

• Nexus delivered projects across all six target markets with in-house consultants, eliminating subcontractor reliance

• Client satisfaction improved (faster turnaround, consistent quality, direct Nexus branding on all deliverables)

• Average project margin: 55-60% (no subcontractor fees, lower travel costs due to local presence)

Compliance and Risk Mitigation

PE risk (2020-2025):

• Zero PE audits or challenges from tax authorities in Malaysia, Indonesia, Vietnam, Thailand, or the Philippines

• Clean separation between Singapore-contract work (remote strategic) and local-contract work (fieldwork) maintained through time tracking and contract documentation

Contractor misclassification risk (2020-2025):

• Zero misclassification disputes. All regional consultants held formal employment contracts with statutory benefits

Employee retention (2020-2025):

• Dual employment structure provided consultants with employment security (formal contracts, statutory benefits) whilst allowing flexibility to work on Singapore projects remotely

• Turnover rate: 12% annually (below industry average of 18-22% for consulting firms)

Lessons Learned: Nexus's Reflections on Dual Employment

Lesson 1: Time Tracking Discipline is Non-Negotiable

"We learned early that vague allocation does not work. If a consultant says 'I spent most of my time on fieldwork this month,' that creates tax and PE risk. We implemented weekly time tracking where every hour is categorised as Singapore-attributable or local-attributable. This gives us clean documentation if any tax authority ever questions our structure".

Lesson 2: Choose PEO Partners Who Understand Co-Employment

"Not all PEOs are comfortable with dual employment. Some PEOs wanted exclusive employer status and objected to our Singapore contract. We specifically selected PEO partners who had experience with co-employment arrangements and understood that their role was to handle local compliance whilst we managed the consulting work".

Lesson 3: Double Taxation Agreements Are Critical

"Singapore's extensive DTA network made this structure viable. If Singapore did not have DTAs with Indonesia, Malaysia, Vietnam, Thailand, and the Philippines, consultants would face double taxation on Singapore-contract income. The DTAs allow consultants to claim foreign tax credits, avoiding that trap".

Lesson 4: Dual Employment Works Best for Professional Services

"This structure is particularly well-suited for consulting, research, advisory services where work cleanly splits into remote strategic work and local fieldwork. If we were a manufacturing company or a retail operation requiring full-time on-site presence, dual employment would not fit. The model works because our consultants genuinely perform two distinct types of work in two locations".

Lesson 5: Communicate Structure Clearly to Consultants

"When we first introduced dual employment, consultants were confused. 'Am I working for Nexus Singapore or the local PEO?' We clarified that they work for both, simultaneously. Nexus Singapore manages projects and career development. The PEO handles local payroll and compliance. Once consultants understood the split, adoption was smooth".

When Does Dual Employment Structure Make Sense?

Not every professional services firm needs dual employment. Here's how to assess fit.

You Likely Benefit If:

• You are a Singapore-based consulting, research, advisory, or technology services firm expanding into multiple Southeast Asian markets

• Your work splits cleanly into remote strategic work (analysis, reporting, client management) and local fieldwork (interviews, site visits, events)

• You need 3-10 professionals per country initially, making subsidiary setup financially unviable

• You require full operational control over work quality and client relationships (ruling out subcontractors)

• You want to avoid PE risk whilst maintaining regional presence

• Your consultants will spend 60-80% of their time in their home countries, with occasional travel to Singapore or other markets

Simpler Alternatives May Work If:

• You only need occasional presence in one foreign market (short-term visitor arrangements may suffice)

• Your team performs work that does not create PE risk (e.g., back-office support with no client-facing activities in local markets)

• You plan to hire 20+ people per country within two years, justifying the cost of subsidiary setup

• You prefer true independent contractor relationships and can structure work to avoid misclassification risk

Dual Employment vs Other Regional Expansion Models

Dual Employment vs Full Subsidiary Setup

Dual employment wins when:

• Team size per country is small (3-15 people)

• Speed to market matters (PEO setup takes 2-4 weeks vs 3-6 months for subsidiary incorporation)

• Compliance burden must stay in Singapore (one HR team manages all consultants centrally)

Subsidiary setup wins when:

• Team size per country exceeds 20 people (entity costs spread across larger headcount)

• Local entity provides strategic benefits (client preference for local registered companies, government tender requirements)

• Long-term commitment to market justifies upfront investment

Dual Employment vs Pure Contractor Model

Dual employment wins when:

• You need operational control (contractors work on multiple clients simultaneously; employees focus exclusively on your projects)

• Contractor misclassification risk is high (exclusive relationships, ongoing work, company branding)

• Employee retention matters (formal employment provides job security and benefits)

Pure contractor model wins when:

• Work is truly project-based and episodic (3-6 month engagements, then gaps)

• Contractors maintain independent businesses serving multiple clients

• You are comfortable with less control over contractor availability and work methods

Practical Considerations for Implementation

Contract Drafting

Both employment contracts must clearly define scope of work, work location, and compensation allocation. Ambiguous contracts create tax and labour law exposure.

Singapore contract must specify:

• Work performed remotely or during Singapore visits

• Activities that do not require physical presence in local country

• Compensation as fixed monthly salary or hourly rate

Local PEO contract must specify:

• Work performed physically in local country

• Fieldwork activities requiring in-country presence

• Compensation linked to local work hours

Tax Residency Planning

Consultants must track physical presence carefully to determine tax residency. Most countries use a 183-day test: if you spend 183+ days in a country during a calendar year, you become tax resident there.

Example:A consultant based in Vietnam who spends 200 days in Vietnam, 80 days in Singapore, and 85 days travelling becomes a Vietnamese tax resident. Vietnamese tax authorities will tax worldwide income, but Singapore-Vietnam DTA provides relief to avoid double taxation.

PEO Selection Criteria

Choose PEO partners based on:

• Experience with co-employment:PEO must be comfortable with dual employment arrangements

• Payroll accuracy:Errors in tax withholding or social insurance contributions create consultant and company liability

• Responsiveness:PEO must handle urgent payroll changes, visa support, employment contract amendments quickly

• Transparent pricing:Avoid PEOs with hidden fees or unclear service charges

Ongoing Compliance Monitoring

Dual employment requires active monitoring to maintain compliance:

• Quarterly reviews:Audit time allocation to ensure Singapore vs local split remains defensible

• Annual tax residency checks:Confirm each consultant's physical presence and tax residency status

• Contract renewals:Update employment contracts annually to reflect changes in scope, compensation, work location

• PE risk assessment:If consultant responsibilities expand (e.g., signing contracts on behalf of Nexus in local country), reassess PE risk immediately

Dual employment structures allow professional services firms to scale across Asia without the compliance burden of multiple legal entities, whilst avoiding the risks of pure contractor models. For firms like Nexus that need regional presence, operational control, and clean compliance, dual employment delivers all three.